Knowledge-based entrepreneurship and employment growth in Portugal

Abstract

In this paper we try to assess the direct impact of knowledge-based entrepreneurship (understood as the creation of new firms that intensively rely on more educated workers) on net changes in employment at both the economy and the industry levels. Based on a descriptive analysis, we show that new knowledge-based firms (KBF) differentiate themselves from other firms (new or not new) by having a positive direct contribution on net employment growth (whereas most groups of incumbents contribute negatively to changes in employment in subsequent years). Notwithstanding, new KBFs’ direct impact on net employment growth is rather small, for two reasons: first, although KBFs tend to add jobs to the existing ones in net terms, the number of additional jobs for each employee in the base year tends to be modest; secondly, the share of new KBFs in overall employment is marginal. These results show some variability across industries, as a result of both the knowledge-intensity and the rate of firm turbulence of each industry. In any case, only in a few industries can new KBF be said to make a difference in net employment growth (among which stand out some knowledge-intensive services).